Governments Are Different

Suppose I told you that governments have an impossible task and they are doing their best. In some ways that is probably true. The problem is that their ideas of what is best conceivably, are different than yours are.

The reason theirs turn out different than yours is that they use a different way to measure. Their way counts votes, whereas yours may be based on other factors and almost certainly not that one.

You can learn to think their way and sometimes that will give you insight into how the marketplace may evolve. Here is what you need to notice:

  • You can estimate votes by counting voters
  • Voters are motivated by their personal and local wants and needs, not by more global factors.
  • Necessities matter to them more than conveniences and luxuries
  • Many of their wants are inelastic. (They don’t change much with price)

This leads us to very predictable places.

By counting voters, we know that there are more people who eat than there are farmers. Cheap food is a good thing for the many not so much for farmers but they need to make enough to stay in business. Clear policy directions here. Similarly, there are more tenants than landlords, and more patients than doctors. Not fields where you can expect to be left alone.

Most voters care about their specific needs like jobs and roads and schools and hospitals. For politicians, global warming and foreign policy are things to talk about not things to act upon. If they act they could hurt someone’s local interest and that is antithetical to their purpose.

Necessities matter and some like those above are regulated already. Necessities change over time. Expect internet access and energy to hit the regulated, subsidized and supported list sometime in the intermediate future.

From the political perspective, if someone will buy something regardless of price, there is little excuse for failing to tax it. Interest and employment income are taxed worse than business income. Think how sales taxes work and then think about entertainment tickets, liquor, wine, cigarettes, plane tickets and gasoline. Look for taxation of soft drugs and fatty or sugary food to come.

Politics is just common sense. You need to see their side to make it fit your common sense.

Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. | Twitter @DonShaughnessy | Follow by email at moneyFYI

3 Comments on “Governments Are Different

  1. How about this.

    You are comparing two different transactions here so you have no hope of establishing commonality.

    The doctor’s prescription is a grudge purchase. It costs the doctor nothing and there is no ill consequence for him or her if the advise isn’t followed. The he has the choice of engaging in an hour long conversation about lifestyles and nutrition that most patients don ‘t want to hear….or waving the prescription pad and whisking the patient out of the office, full of optimism that this new pill will erase the health problems they have brought o themselves through sloth and overindulgence. Meanwhile the prescribing doctor will ne able to entertain five more OHIP-paying customers in the next hour and be that much clloser to paying off his million dollar student loan that haunts his every tax return…not to mention guaranteeing himself a top berth at the next pharmaceutical conference aboard Sovereign of the Seas.

    The financial planner on the other hand faces the direct prospect of multi-facetted financial loss if his recommendations are not followed. Not to mention the fact that he is not in a profession that has been elevated to semi-divinity and subsidized by the tax dollars of the teeming throngs of mortals who surround him.

    Thee financial planner is therefore keenly aware of his financial vulnerability and thus finds it in his best intetests to communicate the value of his recommendations effectively.

    So until we come to the point where both professions are similarly remunerated it may be futile to compare actions and result of the two,both of whom (without impuning motives) are clearly operating in heir own self interests.

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